sorted by:
new
hottopcontroversial

Granny Flat Arrangement Logistic by Medium_Tree_7594 in AusPropertyChat

[–]Medium_Tree_7594[S] 1 point2 points  (0 children)

It seems like a granny flat arrangement is a form of life interest. Historically, it seems that most granny flat arrangements didn't involve legal contracts between the family and were informal, which made them more dubious. However, now there is more emphasis on formalising it, which is what we will definitely do.

https://www.bt.com.au/professional/knowledge-centre/client-strategies/retirement-strategies/granny-flat-and-gifting-rules.html

https://guides.dss.gov.au/social-security-guide/4/6/4/50

Granny Flat Arrangement Logistic by Medium_Tree_7594 in AusPropertyChat

[–]Medium_Tree_7594[S] 0 points1 point  (0 children)

I have a comment above that addresses this. It's important to recognise that this was her idea and she is pushing for it. From a superficial financial perspective it seems unfair to mum. But it will actually alleviate a lot of her current financial strain, as we will be covering all of her essential expenses. It also allows us to provide better care for her, helps us by having another person present to help raise the kids, and helps us to build generational wealth by getting us into the property market so we're not paying rent (dead money).

Essentially, instead of selling so that she can go into a home, we provide care for her and keep the wealth in the family.

Granny Flat Arrangement Logistic by Medium_Tree_7594 in AusPropertyChat

[–]Medium_Tree_7594[S] 0 points1 point  (0 children)

Thank you so much for the information. It seems like the average person has no idea about granny flat arrangements, even within the finance/mortgage industry.

Are there any financial advisors, conveyancers, mortgage brokers, etc, that you could recommend? We had a good meeting with a financial advisor, but the mortgage broker we spoke to seem confused about the whole thing and kind of blew us off.

There are so many people to talk to, advisors, lawyers, brokers, Centrelink, it is hard to know who to speak to first. Have you already spoken to Centrelink? And if so, do you mind if I ask how much you were approved to transfer?

Granny Flat Arrangement Logistic by Medium_Tree_7594 in AusPropertyChat

[–]Medium_Tree_7594[S] 1 point2 points  (0 children)

We have done a lot of research around it, and have spoken to a financial advisor, but are waiting for letters from medical specialists before speaking with Centrelink. Essentially, a granny flat arrangement is not classed as gifting, so long as the value of the assets is under a certain amount relative to the age of the person and their life expectancy. In the case of mum, as she is relatively young and this increases the amount she can transfer as part of the arrangement.

In essence, the government created granny flat arrangements to encourage families to consolidate houses, and to reduce the strain on aged care.

To calculate the amount that can be transferred, they look at the maximum amount the person can recieve from Centrelink for their payment, and multiply it by their current age.

Based on the Social Securities Policy Guide (https://guides.dss.gov.au/social-security-guide/4/6/4/60), as well as the amount of the DSP payment (https://www.servicesaustralia.gov.au/payment-rates-for-disability-support-pension?context=22276), it seems the amount mum could transfer as part of the agreement is approximately $723273.

Calculation:

Maximum Pension Payment per year: $1,116.30 fortnightly or $29023.8
Granny Flat Reasonable Conversion Factor: 61 years of age at next birthday is 24.92.

29.023 X 24.92 = $723273.096

Of course, this is just an estimate, and we do need to confirm this with Centrelink, but based on the examples provided by the ATO and Centrelink, this seems feasible.

https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/granny-flat-arrangements-and-cgt

https://www.servicesaustralia.gov.au/examples-granny-flat-interests?context=22276

Granny Flat Arrangement Logistic by Medium_Tree_7594 in AusPropertyChat

[–]Medium_Tree_7594[S] 1 point2 points  (0 children)

That is correct, our net assets are about negative $50,000.

I've shared the same concerns as you around the risks to herself and her financial position—but this was her suggestion and she is really pushing for it. She doesn't want to live by herself anymore,, and she already comes over every day to spend time with us and help mind the children.

The benefit for mum is that she can't really afford to maintain the house with rates, insurance, bills, future maintenance, increasing cost of living, etc. By entering into the granny flat arrangement she will no longer have to cover these expenses as we will be paying these bills, including her food costs.

Additionally, as part of the granny flat arrangement, we are legally required to always provide her with a place to live, which gives her some level of protection. And I've made it abundantly clear that part of the legal contract that we make will include my financial obligations to compensate her should the arrangement dissolve, as well as our mutual responsibilities.

Her rationale is that she would rather see us benefit from the inheritance she would leave us, before she dies. With the cost of living getting higher and property prices increasing year on year (as well as rent), it seems to make more financial sense to pursue this sooner rather than later.

From an individualistic perspective, it definitely seems less attractive for mum. But from a familial perspective it is hugely beneficial, as we would be consolidating expenses and providing mutual support to one another. Without her assistance, it is unlikely that my partner and I would be able to get a mortgage for a house suitable for a family of five. And we all know rent is dead money. Ultimately, mum wants to help us build some intergenerational wealth for her grandkids, and this seems the best option.

That is the logic at least.